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Openreach hits BT with £70m charge in Q2

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BT is shelling out £70m to fund the creation of Openreach - its new access services division.

Openretch - as it's become affectionately known - forms part of a regulatory deal with Ofcom to ensure that rival telcos and operators get equal access to wholesale services from BT.

In September BT agreed to abide by 230 legally-binding undertakings to help foster greater competition in the UK's telecoms sector including "substantive structural, product and governance changes, affecting both its current and future networks".

Central to that was the creation of a new access services division within BT called Openreach to ensure that all telcos get equal access to BT's network.

Openstench - as Openretch is also known - should be up and running early in the new year.

News of the charge came as BT reported results for the three months to September. And as in the past the UK's dominant fixed line telco reported a fall in traditional revenues in Q2 and a sharp rise in income from what it calls its "new wave" area, which include ICT and broadband.

Or as BT's spin machine put it: "Our traditional business continues to operate in what remains a challenging environment. Our new wave businesses show strong growth both in the UK and internationally."

Indeed, new wave revenue was up 39 per cent compared to last year at £1.4bn.

For the group as a whole,Q2 revenue rose 5 per cent to £4.8bn.

But the £70m hit for Ovenready (aka Openstench) plus an increased payout for workers leaving the company helped to account for a 14 per cent drop in pre tax profits from £571m to £489m compared to last year.

Said chief exec Ben Verwaayen: "The transformation of BT is right on track with the delivery of another successful quarter.

"Revenue has again grown by 5 per cent, with new wave revenues up 39 per cent.

"The settlement we have reached with Ofcom in the UK provides a foundation for certainty and clarity which will deliver further benefits to our retail and wholesale customers and shareholders," he said.

Elsewhere, the giant telco also reported that its retail broadband service continues to face stiff competition from rivals such as AOL, Tiscali and Wanadoo. For although BT provides 6.2m wholesale DSL lines and its retail division has some 2.1m punters, it is only winning one in four of new DSL punters.

By mid morning shares in BT were down 5.4p (2.5 per cent) at 209.09p. ®

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